U.S. Chamber says China should sacrifice local industry to avoid hurting American businesses
Howard Schneider, The Washington Post, April 26, 2011
China’s efforts to promote local industries are undercutting American competition here, U.S. business officials said Tuesday as they questioned whether the nation truly intends to fully open its economy.
In its annual report on the U.S. business climate, the American Chamber of Commerce in China said a collection of rules, standards and other requirements under China’s “indigenous innovation” policy were starting to hamper the ability of outside technology firms to operate.
As the nation has intensified government protection of and support for designated industries, the policies have raised doubts “about the depth of commitment of China’s leadership to reform, of completing the transition” to a more open economy, said chamber president Christian Murck.
U.S. business and political leaders have repeatedly criticized China’s new push to advance its local technology companies, citing the importance of freer access to China’s vast market to American companies. China has become a top destination for U.S. exports, and success there is a central aim of major corporations.
There is a growing acknowledgment, however, that the economic access that has boosted China’s growth over the past 20 years – and opened the country to companies such as Wal-Mart and General Motors — has entered a new and, for the United States, more complicated phase.
China seems intent on keeping key parts of its economy, such as the finance and service sectors, largely off limits to foreign firms – stalling reform before it touched areas where U.S. companies hold an advantage. At the same time, strict regulations and state support are being used help local businesses in the technology, energy, aviation and other fields that the government hopes to establish Chinese leadership. The U.S. Chamber of Commerce argued in a recent report that those policies are “a blueprint for technology theft” and force foreign firms to either hand over their ideas and know-how or miss out on the growth of what is now the world’s second-largest economy.
In addition, the country appears to be aggressively moving ahead with rules that the chamber said are cutting out foreign suppliers. Last fall, for example, Chinese public security officials began what the chamber characterized as an “intense campaign” to force a variety of public agencies, businesses and other institutions to install locally developed software to protect computer systems.
China cast the move as a national security issue, but the chamber said the requirements went well beyond the norms set by other countries. When the government does allow foreign software, the chamber said, the regulations require foreign companies to let Chinese officials review the underlying code.
The rules “maintain an overly broad definition of national security, which is contrary to standard international practice,” the chamber reported. Many developed countries, including the United States, have collaborated on common standards that allow computer security programs to be tested by independent labs.
The chamber report said that U.S. companies as a whole were doing well in China – reporting higher profits and growth, as well as “pre-crisis” levels of confidence in the economy.
But there is a developing sense that China, having opened itself to freer trade in goods and having benefited from the global market access gained by joining the World Trade Organization, may have exhausted the “easy steps” of economic reform, Murck said. What remains – allowing more foreign ownership, loosening control of the financial system, giving outside companies more room to compete – “those are the more difficult steps.”